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Last Updated : Jan 30, 2015 05:34 PM IST | Source: CNBC-TV18

Likely to cross 500 screens by Q1 FY16: PVR

In an interview to CNBC-TV18, CMD Ajay Bijli and CFO Nitin Sood spoke about the company‘s performance in the quarter ended December and the outlook going ahead.

PVR's third quarter consolidated net profit jumped 127.2 percent year-on-year to Rs 31.6 crore driven by strong revenue and operational growth.

In an interview to CNBC-TV18, CMD Ajay Bijli and CFO Nitin Sood spoke about the company’s performance in the quarter ended December and the outlook going ahead.

Below is verbatim transcript of the discussion:

Q: It has been a good quarter with the exhibition business doing very well for you?


Bijli: Yes, we are very happy with the kind of growth we have achieved on various fronts. The overall revenues have gone up come compared to last quarter by 24 percent. We have about Rs 421 crore revenue, our EBITDA margin has improved and is close to 20 percent and it is Rs 85 crore which is much higher than what we did last year in the same period.

We have 16 billion people who visited us. We are up on spend per head (SPH) which is the food and beverage revenue. Even our marketing income has grown by 25 percent. So it has been a good quarter on the back of some good films and underpin by our own circuits in the right locations and the right malls.

Q: Last quarter you saw some big movies like Bang Bang, Haider, Happy New Year, PK all of which performed well for you so that is one reason for why you have done well but how much of this sustainable?

Bijli: There are two symbiotic relationships that we have, one is the exhibition circuit. First of all the circuit has to be good, it has to be at the right locations and it has to be in the right malls, right cities where major consumption of movie is happening and that is happening across the country.

PVR has tried to have a circuit which is very well positioned and of course you have a constant flow of film and the appetite of people to watch movies has to remain.

If you look at all these three factors it is a sustainable model. Fourth quarter you have issues of exams and Indian Premier League (IPL) and this time World Cup is coming so traditionally fourth quarter has always been slow. Otherwise it is a three quarter sustainable business with the kind of numbers you have seen in Q3.

Q: I just wanted to talk about the food and beverage revenues a little more because the average spend has increased by 23 percent which is the highest you have ever seen. Do you expect this to go up further and how much could that result in higher overall blended margins for the company?

Bijli: We have a captive audience, 16 million people came this quarter and overall about 70 million will come. We are just focusing a lot on ensuring that the perception of food and beverage being sold in the cinemas improves dramatically. So lot of focus on the backend, supply chain, quality, the way we sell.

It is a very important component almost Rs 350 crore of revenues come from food and beverage and the Cost of goods sold (COGS) is close to about 27 - 28 percent. Any growth in this revenue line only improves the overall margin. So we are focusing a lot on that.

Q: Are you going to take any more hikes on your average ticket prices?

Sood: We look at our average ticket prices carefully. They are all measured on the time of the day and day of the week basis and they are very local cash spent driven.
On an average we have seen ticket pricing growing at an average compound annual growth rate (CAGR) of about 6-7 percent over the last five-six year period and that continues to hold true even for this year as well. So, I do not think there is going to be any dramatic significant change from that but we will continue to grow with the rate of inflation.

Q: What are the movies in the pipeline in the months to come?

Bijli: January has been good, we had Baby and few other films, but we have Roy, Shamitabh, Badlapur coming and this is the last quarter. So, up to February end we have films coming and in March we have some smaller films but next year again we have the usual line-up - Ranbir didn’t make any movies this year barring Roy, so four films of Ranbir are coming and during Diwali we have Shah Rukh Khan’s movie, Salman Khan in Eid and Akshay Kumar every quarter.

Q: It’s like you have branded the festivals?

Bijli: That’s the pattern and then either on August 15 or October 2 you have Hrithik Roshan, so that is how the pattern has been for the last several years that these key superstars come out with movies on long weekends when there is a public holiday which is good for the business as well and they have anchored those positions, in fact there is more predictability in your revenues as well now because you know that these guys are going to come around these days. So it is a good lineup.

Hollywood films are looking much stronger because they had a bad year last year. A lot of big movies like Avengers 2, James Bond, Superman 2, these movies are the ones which fill up the cinemas. They may not have the critical acclaim but they have mass appeal, so lot of movies are coming like that.

Last couple of months now, we have a lot of Oscar films coming, so before Oscars because our cinemas are in demographics where people like English films, Hollywood films, so even the Oscar films in PVR do very well, so we are okay for this quarter as well as the next year.

Q: You are slated to cross 500 screens, by when will that happen?

Bijli: This quarter end we will reach about 483 screens and we have almost 100 screens at the fitout at any given time. So maybe end of quarter 1 next year we should be close to 500 screens.

Q: Coming back to the food and beverage business, there is one complaint from a lot of movie goers like me that the prices of the beverages go up every time you go, in fact it has become exorbitant now the prices of popcorn etc, are you planning to take any more price hikes over there?

Bijli: Pricing is very analytical thing. We just cannot at random charge anything we want to. But we have to be very careful but we try to maintain a certain standard, certain quality, there is a lot of wastages that happen, so we get rid of that.

Generally, people are happy with the quality that is why you are seeing a big improvement in our F&B revenues as well. But wherever we do find that pricing is becoming too high, we try to come up with combo offers, discounts to ensure that people don’t feel that it is too much.

Sood: To add to what Ajay Bijli said, bulk of the growth, if you look at this quarter of 25 percent on average spending on F&B has come from the volume growth. It is not driven by pricing growth so out of the 25 percent, 7 percent has come from pricing.

About 16-17 percent has come from people consuming more at cinemas due to the change in quality of food and beverage offering. So I think that is a good signal for us to say people want to consume more when they come out to watch movies.

Q: Carnival Films has been on an acquisition spree, it bought bunch of screens in the last few months and aims to get about 300-400 screens this quarter, what is your view on that?

Bijli: The way they are growing is inorganic. Therefore, for us the logos have changed, earlier it was Big Cinemas, now there are Carnival Films and HDIL that they have acquired. So the number of screens is still very less in India. So I think there is no new growth as such that we are seeing with all this.

There is plenty of room for everyone and I respect everyone. We always have to be on our toes and we keep an eye on what everyone is doing and at the same time, we are pretty focused on our own strategy. So I think it is still early days before we start panicking about too many players. The whole country is still growing.

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First Published on Jan 30, 2015 04:34 pm
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